UOB’s Q4 net profit falls 6.2% to S$739 million

SINGAPORE — United Overseas Bank (UOB), the Republic’s third-largest lender, has reported a 6.2 per cent decline in its fourth-quarter net profit, a tad better than analysts’ expectations, as loss provisions surprisingly fell despite the increase in allowances for bad loans in the oil and gas sector.

For the three months ended Dec 31, net profit totalled S$739 million, down from S$788 million in the corresponding period a year ago, UOB said yesterday in a pre-market statement filed with the Singapore Exchange. This is better than the 7.4 per cent fall in net profit to S$730 million forecast by analysts polled by Reuters and Bloomberg.

Net interest income was stable at S$1.28 billion as strong loan growth in the quarter was offset by a 10 basis point decrease in the net interest margin to 1.69 per cent. Non-interest income slumped 6.3 per cent to S$753 million, due to lower trading and investment income, but fee and commission income grew 10.6 per cent to S$531 million, lifted by higher credit card and wealth management fees.

The specific allowance on loans increased S$313 million to S$428 million due to non-performing loans (NPLs) in the oil and gas, and shipping industries. However, total allowance decreased 31.4 per cent to S$131 million in the quarter, due to lower specific allowance on other assets and a release in general allowance, UOB said.

Looking ahead, UOB deputy chairman and chief executive Wee Ee Cheong sounded a cautiously optimistic note. “Global uncertainty, slow growth and rapid digital transformation will continue in 2017. However, Asia with its increasing integration and consumer affluence presents opportunities for long-term players such as UOB.”

He added that while uncertainty remained in the oil & gas industry, the bigger shocks in terms of the bank’s exposure to the ailing sector have already been absorbed.

For the whole of last year, UOB’s net profit fell 3.5 per cent from the previous year to S$3.1 billion, while total income was stable at S$8.1 billion, which the lender said reflected “the resilience of the group’s core businesses in a slowing economic environment.”

Net interest income for last year rose 1.3 per cent to S$5 billion, led by healthy loan growth in the consumer and non-bank financial institution customer segments, even while the net interest margin fell 6 basis points to 1.71 per cent. Non-interest income declined 1.6 per cent to S$3.1 billion. Specific allowances on loans surged S$577 million to S$969 million last year, primarily from NPLs in the oil and gas and shipping industries. Total allowance fell 11.6 per cent to S$594 million, due to lower specific allowance on other assets and a release in general allowance.

UOB’s fourth-quarter net profit decline was less severe than those of its two rivals that reported their results earlier this week. DBS quarterly net profit fell 9 per cent to the lowest in two years at S$913 million while OCBC reported an 18 per cent decline to S$789 million, partly due to rising bad debt allowances as loans to the oil and gas sector soured.

The UOB board has proposed a final dividend of 35 cents per ordinary share. Together with the interim dividend of 35 cents, the total dividend for the financial year ended Dec 31 amounted to 70 cents, down from 90 cents a year earlier.

Following the results announcement, UOB shares rose 1.7 per cent to close at S$21.18 in active trading, with the three banks among the top four most actively traded stocks by value on the SGX. DBS shares gained 0.3 per cent to S$18.60 while OCBC shares increased 0.7 per cent to S$9.52. The benchmark Straits Times Index gained 0.4 per cent to close at 3,107.65.